Behavioral Strategy in the Wild: Contradictions, Divergences and Empirical Evidences

Abstract

Since Powell, Lovallo, and Fox (2011) first introduced cognitive and social psychology to the study of strategic decision-making, the concept of "behavioural strategy" has evolved significantly. In the years that followed, a substantial body of research has examined a wide range of cognitive biases and investigated strategies to mitigate their effects. This thesis evaluate whether behavioural strategy has moved beyond controlled experimental settings into real-world applications, to assess the effectiveness of debiasing mechanisms, and to explore its interaction with broader organisational theories.

Chapter 2, “Behavioural Strategy in the Wild,” reviews the evolution of behavioural strategy and its application in addressing real-world challenges. It categorises debiasing techniques into three families (i.e., analytical, organisational and debate techniques) and examines their effectiveness across four domains: mergers and acquisitions (M&As), military intelligence, resource allocation, and capital projects.

Chapter 3, “How organisational structure influences underperforming business units: Recovery, exit, and corporate profitability”, empirically investigates how corporate partitioning influences firms’ commitment to underperforming business units and the outcomes of such commitments. Specifically, I show that there is an inverted U-shaped relationship between the number of segments in which firms are organised and the likelihood of recovery for loss-making segments.

Chapter 4, “From mutual forbearance to multifrontal rivalry: Conditional limits to strategic restraint”, explores the dynamics of multimarket contact and the conditions under which firms competitive arousal overrides mutual forbearance. Specifically, we show that mutual forbearance (i.e., tendency to refrain from aggressive competitive moves across shared markets) often breaks down when there are more overlaps, when the nonoverlapping segments are highly profitable and when the industry is growing.